Correlation Between GM Breweries and Cholamandalam Financial

Can any of the company-specific risk be diversified away by investing in both GM Breweries and Cholamandalam Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM Breweries and Cholamandalam Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GM Breweries Limited and Cholamandalam Financial Holdings, you can compare the effects of market volatilities on GM Breweries and Cholamandalam Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM Breweries with a short position of Cholamandalam Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM Breweries and Cholamandalam Financial.

Diversification Opportunities for GM Breweries and Cholamandalam Financial

0.45

Correlation Coefficient

GM Breweries  Cholamandalam Financial

Very weak diversification

The 3 months correlation between GMBREW and Cholamandalam is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding GM Breweries Limited and Cholamandalam Financial Holdin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cholamandalam Financial and GM Breweries is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on GM Breweries Limited are associated (or correlated) with Cholamandalam Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cholamandalam Financial has no effect on the direction of GM Breweries i.e., GM Breweries and Cholamandalam Financial go up and down completely randomly.

Pair Corralation between GM Breweries and Cholamandalam Financial

Assuming the 90 days trading horizon GM Breweries Limited is expected to generate 1.14 times more return on investment than Cholamandalam Financial. However, GM Breweries is 1.14 times more volatile than Cholamandalam Financial Holdings. It trades about -0.04 of its potential returns per unit of risk. Cholamandalam Financial Holdings is currently generating about -0.28 per unit of risk. If you would invest  88,380  in GM Breweries Limited on October 3, 2024 and sell it today you would lose (7,125) from holding GM Breweries Limited or give up 8.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

GM Breweries Limited  vs.  Cholamandalam Financial Holdin

GM Breweries Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GM Breweries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cholamandalam Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cholamandalam Financial Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with GM Breweries and Cholamandalam Financial

The main advantage of trading using opposite GM Breweries and Cholamandalam Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM Breweries position performs unexpectedly, Cholamandalam Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Cholamandalam Financial will offset losses from the drop in Cholamandalam Financial's long position.

The idea behind GM Breweries Limited and Cholamandalam Financial Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.